Florida condominium prices prove too good to pass up

Sarasota Herald Tribune printed the article - Florida condominium prices prove too good to pass up on December 24th, 2010. I posted it below.


Realtor Marc Rasmussen of Michael Saunders & Co., at Palm Bay Club on Siesta Key, where he sold a unit for $600,000 in November. Rasmussen said he is seeing snowbirds in the market, buying a University Park townhome for $225,000 in addition to the Siesta Key sale.

Published: Friday, December 24, 2010 at 1:00 a.m.
Last Modified: Thursday, December 23, 2010 at 8:10 p.m.
Rules governing mortgages on condominiums in complexes with too many foreclosures, or too little money in reserves, or too many investors, have hampered sales all year.
But the sales picture looked a little better in Florida in November, and some market watchers are predicting a very happy new year -- because depressed prices may fall even further in 2011.

Statewide, condo sales were up 11 percent in November from the same month a year ago, and they were really up in the state's biggest condo market -- Miami.

All told, 1,039 condos changed hands in that city last month, a 71 percent increase from the 609 condos that sold in November 2009.

Peter Zalewski, who runs CondoVultures.com, said legislative changes governing the number of units investors can buy before being classified as developers have eliminated the last major hurdle blocking institutional investors from gobbling up surplus supply.

"Big money came in guns-a-blazing and took down the last of the newly constructed condos between I-95 and the water," Zalewski said. "As a result, smaller investors were forced to look at buying older condo units in the Miami area and started heading out of South Florida in a big way."

West Palm Beach was the first target, Zalewski said. But investors also began shopping in other markets around the state, including Orlando, Tampa and Southwest Florida, where there are some tremendous values as compared to the market boom.

With loans still hard to come by, the northward migration of investors is an encouraging sign, Zalewski said. These cash-only buyers will help soak up inventories all over the state, but their buying activity is unlikely to cause prices to rise.

Statewide, the median price fell 16 percent to $88,200 in November, from $104,500 in November 2009. In Miami, the median dropped 29 percent to $105,600 and in Sarasota-Bradenton it was down 7 percent to $130,500.

"Cash buyers dictate prices," said Jack McCabe, a Deerfield Beach real estate consultant. "These buyers account for 30 percent or more of the foreclosure and short-sale market, and they are still looking for discounts. As a result, condo prices will probably decline more."

But with the median price falling so hard, there will be a lot of people looking at 2011 as the buying opportunity of a lifetime, McCabe said. And that goes for other areas of the state, too, like Orlando, where the median condo price has dropped below $50,000.

In Sarasota-Bradenton, where condo sales rose 5 percent in November -- to 252 from 239 a year ago -- some agents are feeling more optimistic.

"I've been really busy since the election," said Marc Rasmussen, an agent with Michael Saunders & Co. in Sarasota. "Maybe the results gave people confidence to spend money."

Rasmussen said he is seeing more snowbirds in the market for a place to spend the winter, and they have snapped up everything from a University Park townhome for $225,000 to a Palm Bay condo on Siesta Key for $600,000.

"Florida is very affordable right now," Rasmussen said. "I don't think anyone can complain about the affordability."

Perry Corneau, a condo specialist who recently merged his company with Signature Sotheby's, said he is also seeing the return of the illusive end-user to the condo market.

"There are two types of investors," Corneau said. "There's the hard-core investor who will never use a condo and then there's the second-home buyer who is not quite ready to move in but is buying because of the incredible values," Corneau said. "Those types have been active. But I am also starting to see the real end-users coming back. Perhaps they are feeling more optimistic after the election or about the economy in general."

Jeanne Corbin, an agent with Venice Real Estate Co., still sees a reluctance on the part of buyers to venture into the condo market because of a fear of the unknown. But she said there are indications that attitudes might be changing.

"I met some British folks on a cruise who see they can now buy places for pennies on the dollar," Corbin said. "They talked about how they are getting 1 percent returns on their CDs and that it might be time to get back into real estate."

Corbin added that retiring boomers acknowledge that they will have problems selling their homes up north and will never make as much as they thought they would, but are thinking the bargains in Florida are too good to pass up. And there really are some incredible bargains.

Take Matt Kihnke, for example.

The Chicago real estate investor made good money converting entire apartment complexes in Bradenton into condominiums during the boom, and now is buying some of those units back for as much as 85 percent less than his original sales price.

Since July, Kihnke has bought two units at the Sanctuary in Bradenton for $24,400 and $19,900. Those units sold for $165,000 and $109,900 during the boom, property records show.

That is not to say that there are not still risks in condo buying. There is always a chance that a condo purchased in a complex for a bargain will end up costing buyers far more than they anticipated if maintenance issues result in large-dollar assessments.

"A year ago, people that were thinking of buying condos were afraid of all those issues," said Corneau, the condo specialist. "There was a lot of fear. But I think the fear will subside."